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Legal Environment

By: Manik Arora MFM-3 NIFT PATNA

Item covered under textiles/garments


Readymade

Garments Cotton Textiles


Man-made Textiles Wool & Woolen Textiles
Silk Textile Add

handicraft, Coir & Coir Manufacturers

Men & Boy wear: 1. Shirts (Classical/casual) 2. Trousers/jeans 3. Shorts/ Bermuda 4.Coats/Suits 5.Nightwears 6.Undergarments 7.Others.

Ladies & Girls (women) 1. Salwar Suits 2. Frocks & Middies 3. Nightwear. 4. Skirts 5. Trousers/jeans 6. Blouses 7. Party wear. 8.Kurta, pajama, churidar. 9.UndergarmentsSameej, panties, bra. 10.Petticoats. 11 Langha, Ghagra & chunni suits 12.Long frocks 13.Other garments

Babies

1. Baby suits 2. Frocks 3. Rompers 4. Shirts 5. Bibs 6. Knickers 7. Jhabla 8. Nepis 9. Other Garmen

Articles of knitted garments for mens, ladies, Girls,& infants 1. Socks 2. Sweaters 3. T-Shirts 4. Other Garments

Industrial &Institution al garments.

Other clothing & Accessories 1. Caps 2. Scarves. 3. Belts 4. Pillow covers/ Bed sheets 5. Saree falls 6. Curtains 7. Cushions Covers 8. Others.

1. School Uniforms 2. Apron 3. Hand Gloves 4. Industrial Uniforms.

Govt. initiatives for increasing garment export

AEPC Export Promotion Activities:


Over 11 overseas projects amounting to US$ 2.96 million planned for the year 2009-10. Foreign fairs (HKFW, Magic, Interselection, etc.) Delegations (US, Tunisia, Brazil, Argentina, Chile, Panama, Columbia, etc.) Market weeks Sourcing fairs Seminars & Workshops (REACH, Fashion Forecast, World Apparel Congress, etc.) India International Garment Fair (bi-annual event).

The Government has set a target of $14 billion for garment exports in the 2011-12 fiscal as demand is on the rise in the western markets, India International Garment Fair. The three-day exhibition is being organised by the Apparel Export Promotion Council. The government is focusing on initiatives for promotion of apparel exports. Also, a number of new schemes including government support for the common compliance code and knitwear technology mission are proposed The Technology Upgradation Fund Scheme (TUFS) will be a main driver of the exports growth. The Government had restored TUFS by increasing Eleventh Plan allocation to Rs 15,432 crore from Rs 8,000 crore. Earlier, the Government had earmarked Rs 8,000 crore for this purpose, which was exhausted by June 2010. Subsequently, it had asked banks to suspend new sanctions under the scheme till allocation of additional funds.

According to the provisional DGCI&S data, textile exports during fiscal 2005 06 stood at around US$17 billion, recording a 22% gro wth yearonyear. Except for manmade textiles, all segments in the textile industry, including handicraft carpets, wool and silk, h ave recorded a growth in exports during 200506 the first year since the phasing out of the quota system in the global market.

Readymade garments (RMG) is the largest export segment, accounti ng for a considerable 45% of total textile exports. This segment has be nefited significantly with the termination of the MultiFibre Arrange ment (MFA) in Jan 05. In 200506, total RMG exports grew by 29 %, touching US$ 7.75 bn. In 200304 and 200405, the growth in RMG exports was 8.5% and 4.1% respectively. The jump in 200506 exp orts has been largely due to the elimination of quotas.

Exports of cotton textiles which include yarn, fabric and ma deups constitute over 2/3rd of total textiles exports (excludin g readymade garments). Overall, this segment accounts for 26% of total textile exports. According to the Ministry of Textiles, in 20050 6, total cotton textile exports Source: Ministry of Textiles, GoI So urce: Ministry of Textiles, GoI XVI were worth US$ 4.5 bn, implyin g a growth of 27% over the exports in 200405, which were worth US$ 3.5 bn.

The removal of the SSI reservation for woven a pparel in 2000 and knitted apparel in 2005 were significant decisions in pr omoting setting up of largescale firms. Governme nt schemes such as Apparel Parks for Exports (A PE) and the Textile Centers Infrastructure Develop ment Scheme (TCIDS) now provide incentives for establishing manufacturing units in apparel export zones.

The new Textile Policy of 2000 set the ball rolling for policy reforms in the textile sector, dealing with r emoval of raw material price distortions, clust er approach for powerlooms, pragmatic exit of idle mills, modernization of outdated techno logy etc.

The Union Budget of 20052006 announced competitive progressive policies, whose salient features included: A major boost to the 1999established Technology Upgradation Fund Scheme for its longevity through a Rs 4.35 billion allocation with 10% capital subsidies for the textile processing sector Initiation of cluster development for handloom sector Availability of health insurance package to 0.2 million weavers from 0.02 million initially

Reduction in customs duty from 20% to 15% for fibres, yarns, int ermediates, fabrics and garments; from 20% to 10% on textile ma chinery and from 24% to 16% in excise duty for polyester oriented ya rn/polyester yarn
Reduction in corporate tax rate from 35% to 30% with 10% surcharge Reduction in depreciation rate on plant and machinery from 25% to 15% Inclusion of polyster texturizers under the optimal CENVAT rate o

Government Initiatives

In the recent period, the trade policy in India reflects the strategic importance of Indias comparative advantage of trade in services. The services sector has been identified as a thrust sector for trade policy. The Foreign Trade Policy, 2004 09 has announced the setting up of Services Export Promotion Council to map opportunities for key services in import markets and to develop strategic market access programme. Some of the key initiatives of the government in promoting exports of consultancy services are through Market Development Assistance (MDA), Market Access Initiative (MAI) scheme, proactive EXIM Policy and EXIM Bank schemes. Government also provides exemption on service tax for export of consultancy services. However due to lack of clarity in the provisions in the present notification, consultancy export may be affected Income tax exemption under section 80 O need to be reinstated to enhance consultancy export.

Committees for garment exports

Garment Exporters Association of Rajasthan (GEAR) was formed in the year 1978 with help of Founder Members. The main aim was to promote export of Garments from Rajasthan, Since no such apex organization was in existence at that time. Now there are around 140 members, out of which 60% are life members. The members are exporting Readymade Garment all over the world. Over the last 26 years, Association has been continuously in the task of promoting exports by organizing buyers-seller meets, trade exhibitions, Garment Fairs etc. In its constant endeavored to promote and expose Indian Garments to International markets for greater visibility and choice of products.

Committees

Apparel Export Promotion Council Carpet Export Promotion Council Cotton Textile Export Promotion Council Export Promotion Council For Handicrafts Handloom Export Promotion Council Indian Silk Export Promotion Council Powerloom Development & Export Promotion Council Synthetic & Rayon Textile Export Promotion Council Wool & Woolens Export Promotion Council

Export Inspection Council, New Delhi:

The EIC, an autonomous body, is responsible for the enforcement of quality standards and compulsory pre-shipment inspection of the various commodities meant for export and notified under the Export (Quality Control & Inspection) Act, 1963. It was set up under Section (3) of the Export (Inspection and Quality Control) Act, 1963. It is headed by a Director. EIC is assisted in its functions by the Export Inspection Agencies(EIAs) located at Chennai, Delhi, Kochi, Kolkata and Mumbai alongwith a network of 42 suboffices and laboratories to back up the pre-shipment inspection and certification activities.

Schemes

The Government has also provided industry a conducive policy environment and initiated schemes which have facilitated the growth of the industry. The Technology Mission on Cotton has increased cotton production and reduced contamination levels. The Technology Upgradation Fund Scheme (TUFS) has facilitated the installation of the state-of the-art / near state-of-the-art machinery at competitive capital cost. The rationalization of fiscal duties has provided a level playing field to all segments, resulting in the holistic growth of the industry.

The Scheme for Integrated Textile Parks (SITP) was launched in 2005 to neutralize The weakness of fragmentation in the various sub-sectors of textiles value chain, and the nonxxii availability of quality infrastructure. The aim was to consolidate individual units in a cluster, and also to provide the industry with world class Infrastructure facilities on a public private partnership (PPP) model to set up their textile units.

AEPC Export Promotion Activities


Over 11 overseas projects amounting to US$ 2.96 mn. planned for the year 2009-10. Foreign fairs (HKFW, Magic, Interselection, etc.) Delegations (US, Tunisia, Brazil, Argentina, Chile, Panama, Columbia, etc.) Market weeks Sourcing fairs Seminars & Workshops (REACH, Fashion Forecast, World Apparel Congress, etc.) India International Garment Fair (bi-annual event).

Technology Upgradation Fund Scheme (TUFS)


Ministry of Textiles has launched a Technology Upgradation Fund Scheme (TUFS) for Textile and Jute Industries, w.e.f. 1.4.1999 for a period of 5 years, i.e., up to 31st March 2004 which was subsequently extended upto 31.3.2007, i.e., till the end of tenth five year plan.

US's GSP Scheme-with reference to India's textile exports

The revised GSP Scheme was introduced by EU in 1995 valid for four years (extended upto end of 2001) with the following main features: Product coverage: Chapters 25 to 97 of Common Customs Tariffs (CCT) Trade modulation: Categories the products as Very Sensitive (VS) (all the Textile items fall in the VS category); Sensitive (S); Semi Sensitive (SS) and Non Sensitive (NS).

VSs were subjected to a duty of 85% of MFN rate, AS at 70% of MFN rate, SS of 35% of MFN rate and NS full duty waiver. LDCs to get full GSP benefit. 14 Special incentives are in place for those countries which have agreed to enforce labour right, environment protection, combating drug clauses. Graduation mechanism:

(i) If the total value of exports by beneficiary country exceeded 25% of the total value of imports of that product into EU by all beneficiaries, then such country would graduate in the item from 1996.

(ii) If the per capita GNP of any beneficiary country exceeded US$6000, the GSP benefit would be only 50% of his entitlement during April 1995 to December 1995 and the entire from 1996 the entire benefit of GSP would be withdrawn. (iii) Beneficiary country with less than $ 6000 per capita GNP which enjoyed GSP benefit in which they have attained higher degree of trade specialisation would get only 50% of the benefit from 1997 and the benefit would be withdrawn totally from 1998. In respect of products falling under Chapters 50 to 60 originating from India and exported to EU there was a partial waiver of 15% of CCT for the calendar years 1995 and 1996. During 1997 the preferential margin was reduced by 50% and from 1998 the entire GSP benefit ceased to exist since India along with Pakistan graduated from the Scheme. The clothing items falling under Chapters 61 to 63, however, continue to get the benefit of being subjected to 85% of MFN rate

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